Airbnb Arbitration Clause Upheld by D.C. Judge

On Tuesday, Nov. 1, 2016, a decision by Judge Christopher Cooper, for the D.C. United States District Court, upheld Airbnb’s arbitration clause.

The case addressed the issue of whether Airbnb’s sign-up procedure sufficiently notifies its users of the terms and conditions of membership, specifically the organization’s dispute resolution process. What this means, for those renting out space or those renting a room in a person’s home, is if a dispute arises the traditional court system will not be available for resolution. A third-party arbitration panel will provide redress.

The Airbnb arbitration clause was brought into question by Gregory Selden when he filed a lawsuit claiming he was discriminated against by renters, due to his race. Selden, an African-American from Virginia, was planning a trip to Philadelphia. He was familiar with the potential savings offered by Airbnb’s services and began looking for a place to stay. Selden found a location that suited his needs and was available for the dates of his trip. He sent a request for the room but received a message from the renters indicating the room was not available.

What Selden did next is rather interesting. He felt that he was denied the room based on his race, so he decided to create false profiles on Airbnb showing white people as the rental seekers. Their names were “Todd” and “Jesse.” After creating the profiles, he sent a request for the same room and the same dates. Then, he received a response confirming the reservation.

Selden filed his lawsuit in May, accusing Airbnb of “facilitating racial discrimination.” He based his claim, which eventually turned into an effort to create a class action lawsuit against Airbnb, on Title II of the Civil Rights Act of 1964. Title II, “prohibits discrimination because of race, color, religion, or national origin in certain places of public accommodation, such as hotels, restaurants, and places of entertainment.” Selden argued that in cases addressing issues, like those found under Title II, alternative dispute resolution clauses. such as the one found in Airbnb’s sign-up procedure, should not be enforced.

Judge Cooper, also African-American, rejected the argument that “federal civil rights are not subject to arbitration…” Cooper held that the dispute resolution clause applied to all disputes, even those based on race. He wrote that “Mutual arbitration provisions in electronic contracts … are enforceable, in commercial disputes and discrimination cases alike.” The question of whether Selden knew he was going to be held to an arbitration process came under scrutiny. The judge said that when agreeing to the terms and conditions of a service based organization, such as Airbnb, one ought to assume some type of dispute process will be included. The judge also noted that Airbnb’s notice is sufficiently clear.

Cooper explained that “Federal policy dictates that doubts about the applicability of an arbitration agreement should be resolved in favor of arbitration.” These types of clauses are not well understood by the majority of people and are often criticized. This has not affected the increase in their usage nor the protection provided to them by the Supreme Court under the Federal Arbitration Act.

The decision made by Judge Cooper to uphold Airbnb’s arbitration clause reflects that contracts, which include alternative dispute resolution provisions, are not unconscionable. This case addresses two issues of particular concern to many in the U.S., which are binding arbitration clauses and racial discrimination. Cooper did provide, in his decision, what he believed to be an appropriate course of action for those seeking a change to such contractual agreements. He said that while his court was not the correct venue to address these concerns, “Such objections should be taken up with the appropriate regulators or with Congress.”